If you pay personal income tax in Sri Lanka, your tax bill dropped in April 2025. The Year of Assessment 2025-26 brought the biggest changes in three years — and most people haven’t updated their numbers yet. Here’s what changed.
What’s changed for individual filers
Three things moved. Side by side:
- Personal relief: LKR 1,200,000
- First LKR 500,000 — 6%
- Next LKR 500,000 — 12%
- Next LKR 500,000 — 18%
- Next LKR 500,000 — 24%
- Next LKR 500,000 — 30%
- Balance — 36%
- Personal relief: LKR 1,800,000 (+LKR 600,000)
- First LKR 1,000,000 — 6% (band doubled)
- 12% bracket — eliminated
- Next LKR 500,000 — 18%
- Next LKR 500,000 — 24%
- Next LKR 500,000 — 30%
- Balance — 36%
What it means in rupees
Take someone earning LKR 250,000/month gross, no extra reliefs:
- YA 2024-25: LKR 21,000/month tax — LKR 252,000/year
- YA 2025-26: LKR 8,000/month tax — LKR 96,000/year
- You keep: LKR 13,000 more per month — LKR 156,000 across the year
Other 2025-26 changes worth flagging
- WHT on bank interest doubled to 10%.Banks now withhold 10% on FDs and savings (up from 5%). Final tax for individuals — the cash is gone before it hits your account.
- CGT for individuals: 10% → 15%.Applies to shares, property held for sale, and business stake sales.
- Foreign service income exemption: gone.Overseas billing income is now taxable at 15% — or up to 36% if conditions aren’t met. Full picture in our foreign service income piece.
Three things to do this filing season
- Re-do your tax projection.Your 2024-25 spreadsheet is now wrong — almost certainly in your favour. Confirm before the next quarterly self-assessment payment.
- Recheck your bank interest position.WHT on FDs doubled to 10%. If you have substantial interest income, your year-end picture has shifted.
- Claim your other reliefs.Rent (25% of gross), solar (up to LKR 600k), and qualifying payments only apply if you claim them. Most people under-claim — we cover the related errors in 5 accounting mistakes growing businesses make.
A note for employers
If you run payroll, the IRD published seven new APIT tables effective 1 April 2025. Still running the 2024-25 tables means you’re over-deducting from staff — fix it in the next pay run. Bonus, festival advance, EPF/ETF, and qualifying-payment treatment carry over unchanged. (For the VAT-side compliance picture, see understanding Sri Lanka VAT.)
Want a candid review before the November filing deadline? Get in touch.
Already an ERPA client? Upload your YA 2025-26 supporting documents securely at filemytax.erpa.lk →